The letter that a borrower eagerly waits to fill up. Once the loan is issued by the way of
sanction letter, the applicant communicates his willingness to accept the loan by way of
an acceptance letter.
Pay back time! Number of equated installments in the form of post dated cheques, paid out
in advance at the time of disbursement of loan.
Loan payment calculated to pay off the debt at the end of a fixed period,
including interest on the outstanding balance.
An individual in the business of assisting in arranging funding or negotiating
contracts for a client but who does not loan the money himself.
The number of days that the lender takes to process an application for a loan. Find out from your institution to find out what days it counts as business days.
The finance companies classify the borrowers into different categories like
salaried or self-employed. The eligibility and the
documentation differ with the different categories.
The meeting between the buyer and the lender where the funds legally change hands. Also
An agreement, often in writing, between a lender and a borrower to loan money at a future
date subject to the stated conditions.
Much like other commitments, which if one screws up one gets the short end of the straw.
It is an interest, which is charged if you do not draw the sanctioned loan amount within a
period of 6-7 months. The interest rate is usually about 1-2%.
The IMPORTANT PEOPLE! Every Finance Company has its own panel of credit appraisal officers
who process applications. They take into account various factors like income of the
applicants, number of dependents, monthly expenditure, repayment capacity, employment
history, number of years service left over and other factors, which affect the credit
rating of the borrower. Proof of income will also be verified for the purpose of approval
of loan. The time taken for receipt of such information is crucial since it affects the
length of time required for a loan approval.
Wonder why its called down payment when it has to be paid up-front? Finance
companies normally give loans up to 80-85% of the value of the item. The balance would
have to be paid by the buyer, as a payment before he draws on the loan amount.
Equal Monthly Installment (EMI)
EMI or Equated Monthly Installments, refers to the fixed sum of money that you will be
paying to the finance company every month.
The EMI comprises both interest and principal repayment. The size of the EMI depends on
the quantum of loan, interest rate applicable and the term of the loan.
This is a standardized criteria specified by lenders to evaluate willingness and ability
of a customer to qualify for a loan scheme
Process to evaluate the worth in money of an asset/product
The loan amount as against the value of the asset/product. Try avoiding an indecent
exposure, its better for your health as well!
Percentage representation of the amount of annual interest on the total loan amount.
That party in the deed who is the buyer or recipient.
That party in the deed who is the seller or giver.
Gross Monthly Income
The total amount the borrower earns per month, before any expenses are deducted.
A form of insurance in which the insurance company protects the insured from specified
losses, such as fire, windstorm and the like.
Internal Rate of Return is the rate at which the lender accounts for interest.
Margin Amount is the difference between the total cost of the project and the loan amount sanctioned. This money has to be invested by the borrower prior to the release of the loan amount.
This is the value of the property as per the prevailing market value.
This is the maximum amount financed by the bank for a given scheme.
This is the minimum amount financed by a bank for a given scheme.
The borrower in terms of the agreement will be obligated to keep up the schedule of
repayment to deposit the post dated cheques periodically.
Partnership is joint or several ownership of a business with the liability of the
A privilege in a mortgage permitting the borrower to make payments in
advance of their due date
Most banks charge some fee for pre-payment of loan before the tenure is over. The fee is
normally in the range of 1-2% of the pre-paid amount.
The amount of debt, not counting interest, left on a loan.
It is a one time fee which is normally non-refundable and is payable before your loan is
disbursed. The rates may vary from 1-2% of the loan amount.
Single ownership of a business
Reducing balance is the method of reducing the principal amount repaid, from the
outstanding loan amount. Every time you make a payment, the interest you pay is calculated
on balance outstanding principal. The reducing balance can be of 4 types: daily, monthly,
quarterly and yearly.
Loan/Additional loan financed on an existing asset/product .
Role of Guarantor
The role of a guarantor is commitment by the way of agreeing to the terms and conditions
of the loan and liable to the extent of the loan/liability together with the interest and
A contradictory word here as it does nothing but increase your tension. Interest rates are
quotes on a daily rest, monthly rest or annual rest basis. The annual rest quote implies
that the company gives you the credit for the monthly principal repayments only at the end
of each year. Such loans are therefore more expensive than a monthly/daily rest loan. The
shorter the tenure of the loan, the greater the effective interest rate difference will
A letter communicating the sanctioned terms and conditions, once the loan is approved.
Statement of Account
The statement indicating the outstanding loan amount, the amount paid by the borrower, the
appropriations made towards the interest and principal etc. at the end of the financial
Tenure of the Loan
The total time period in which one has to repay the loan. Normally, loans are given for a
period of 6 to 60 months.
Total Initial Payment
Initial payment made by the customer when the asset is purchased and includes service
charges and advance EMI`s if any
Process to evaluate the worth in money of an asset/product